DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTIONS)-1(1), MUMBAI vs. INDIAN EDUCATION SOCIETY , MUMBAI

19. (SC). 5) In the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeal) has erred in not adjudicating the ground raised by the Assessee that the learned Assessing Officer had erred in reopening the assessment on the basis of incorrect, vague, unclear and ambiguous reasons. 6) In the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeal) has erred in not adjudicating the ground raised by the Assessee that the learned Assessing Officer had erred in initiating the assessment u/s 147 by obtaining a mere mechanical sanction u/s 151 from Joint Commissioner of Income Tax (Exemptions) and thus violating the law laid down by Honourable Supreme Court in the case of Chhugamal Rajpal v. SP Chaliha (1971)

79. ITR 603 and also in not providing the copy of satisfaction recorded by such sanctioning authority- prior to giving the sanction.

Others Indian Education Society 7) In the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeal) has erred in not adjudicating the ground raised by the Assessee that the learned Assessing Officer had erred in completing the assessment u/s 144 read with section 147, without providing opportunity of physical hearing thereby violating the provisions and procedures laid down in Section 144B of the Act. 8) In the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeal) has erred in not adjudicating the ground raised by the Assessee that the learned Assessing Officer had erred in completing the assessment u/s 144 read with section 147, without making any additions in respect of the issues mentioned in the reasons recorded for reopening the assessment thereby violating the laws laid down by the Bombay High Court in the case of CIT vs. Jet Airways (1) Ltd [2010] 195 Taxman 117 (Bombay). 9) In the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeal) has erred in not adjudicating the ground raised by the Assessee that the learned Assessing Officer had erred in completing the assessment u/s 144 read with section 147, without issuing notice u/s 143(2) of the Act. 010) the respondent-Assessee craves leave to add/alter/modify/delete all or any of the above grounds. All the above grounds raised are without prejudice to each other.

Others Indian Education Society with the order of Ld. CIT (A) preferred the present appeal before us and the assessee preferred a Cross Objection (CO) as per Rule 22 of the Appellate Tribunal Rules 1963.

Others Indian Education Society Fund was mentioned, and hence, those funds could have been utilized for fulfilling the objects of the Trust.

“(d) income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution, subject to the condition that such voluntary contributions are invested or deposited in one or more of the forms or modes specified in sub-section (5) maintained specifically for such corpus. Explanation 2.—Any amount credited or paid, out of income referred to in clause (a) or clause (b) read with Explanation 1, to any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 or other trust or institution registered under section 12AA or section 12AB, as the case may be], being contribution with a specific direction that it shall form part of the corpus, shall not be treated as application of income for charitable or religious Others Indian Education Society purposes.”

“[2011] 12 taxmann.com 375 (Visakhapatnam) ACIT, Circle-2(1), Visakhapatnam v. Nagarjuna Educational Society On a perusal of the records, it was noticed that the assessment for the assessment year 2001-02 was reopened by the Assessing Officer with the impression that the assessee collected capitation fee in the guise of donation and he had a belief that the assessee- society could not be treated as carrying on charitable activities if it indulged in collection of capitation fee. However, during the course of reassessment proceeding, the assessee- society had given detailed explanations along with supporting documents and, accordingly, the Assessing Officer appeared to have been convinced that the impugned donations/receipts were not capitation fee, though he had not expressly stated so. However, the very fact that the Assessing Officer granted exemption to the assessee under section 11 clearly brought out the fact that he treated the assessee-society as a charitable institution and he was further convinced that the assessee-society was not indulged in the activity of collecting 'capitation fee'. However, the Assessing Officer alternatively chose to proceed to treat the 'corpus donations' as ordinary receipts and, hence, added the 'corpus donations' to the total receipts of the assessee. The Assessing Officer did not give any reason to support his action. Before the Tribunal, the revenue raised the question of 'capitation fee'. However, the case of the Assessing Officer was not that of 'capitation fee', but he was of the view that the donations received by the assessee were not 'corpus donations'. The real question was whether the Assessing Officer was right in law in treating the 'corpus donations' as 'ordinary donations'. [Para 4] All donations received by charitable trusts/institutions are termed as 'voluntary contributions' under the Act. The term 'income' is given inclusive definition under section 2(24). Under clause (iia) of the said section, the voluntary contributions received by a trust or institution created wholly or partly for charitable purposes are treated as 'income'. Under sections 11 and 13, the income from property held for charitable or religious purposes is exempted, subject to the conditions prescribed therein. Section 12A prescribes conditions for applicability of sections 11 and 12 and the primary condition is that the trust/institution should get registration from the concerned Commissioner under section 12A or as the case may be under section 12AA. [Para 5] Section 12 states that the voluntary contributions (not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution shall, for the purposes of section 11, be deemed to be 'income derived from property held under trust wholly for charitable or religious purposes'. A careful reading of section 12 would reveal that the voluntary contributions ('Donations' under common parlance) are divided into two categories under the Act, viz.,

(a) Voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution.

(b) Voluntary contributions made without any such direction.

The first category of voluntary contributions, i.e., those referred in (a) above are called 'corpus donations' in common parlance. [Para 5.1] Voluntary contributions received with a specific direction as stated above, i.e., corpus donations enjoy exemption under section 11(1)(d); however, the said exemption is subject to the provisions of sections 12A and 13, that is, the corpus donations are not required to be compulsorily applied or accumulated as in the case of other income of the charitable trust/institution. However, the voluntary contributions received without any such direction shall be deemed to be income derived from property held under the trust under section 12 and, accordingly, the conditions prescribed under section 11(1)(a) regarding accumulation and application of income shall apply to it. [Para 5.2] The classification of the 'voluntary contributions' depends upon the specific direction. The group of words 'voluntary contributions made with a specific direction' implies that the direction should come from the person who is making the voluntary contribution, i.e., the concerned 'Donor'. If the concerned donor gives a specific direction that his donation shall form part of corpus of the trust, then such voluntary contributions are classified as 'corpus donations' exempt under section 11(1) (d). Since the Act refers to the specific direction of the 'donor', the option, whether a donation would be for the corpus or not, lies with the donor. Thus, it is clear that the classification of 'voluntary contributions' does not depend upon the sweet will and pleasure of the donee trust/institution. Hence, neither the assessee nor the Assessing Officer is authorized to change the character of voluntary contribution from 'corpus' to 'ordinary contribution' or vice versa. It is only the prerogative and privilege of the concerned donor to specify the purpose for which the voluntary contribution is given. However, any trust/institution is not precluded from soliciting donations towards the corpus of the trust/institution. [Para 6] In the instant case, there was no dispute with regard to the fact that the impugned donations received by the assessee had been given with a specific direction that they would form part of the 'corpus' of the institution. The assessee was not denied exemption under section 11. The assessee-society had also furnished the names and addresses of the donors along with the photocopy of the receipts given by it. The assessee also filed confirmation letters from some of the donors to the effect that they had given the impugned corpus donations for the development of the institution. However, the Assessing Officer had failed to examine all those evidences to prove the point that the impugned donations were not given voluntarily. The Assessing Officer also did not examine the concerned donors in that regard. In the absence of examination of the evidences and donors, the view entertained by the Assessing Officer became baseless. Hence, in view of the foregoing discussions, the said voluntary contributions would remain as 'corpus donations' exempt under section 11(1)(d) and the Assessing Officer was not correct in changing the character of corpus donations as ordinary receipts in the facts and circumstances of the case. [Para 7]”

Others Indian Education Society 10. In ITO (Exemptions) v. Serum Institute of India Research Foundation [2018] 90 taxmann.com 229/169 ITD 271 (Pune) (Trib.), the assessee received corpus donations amounting to Rs. 3 crore and it was neither approved by CBDT under section 35(1)(ii) nor under section 12A/12AA of the Act. In the assessment, it was held that the corpus donation was not exempt income and since the provisions of section 11 could not be applied, the entire donation was charged to tax. The tribunal held that in various cases decided earlier, the corpus donation received by a trust was not taxable in spite of the trust being not registered under section 12A/12AA of the Act. It held that despite the detailed deliberations made by the Revenue, the principles relating to judicial discipline assumed significance and priority. It is well settled to uphold a view favourable to the assessee if there are divergent views on an issue. Accordingly, it was held that the corpus donation could not be taxed in the hands of the assessee.

Others Indian Education Society 84/Mum/2024 (A.Y. 2016-17) also. Fact of the case has already been discussed (supra) in the appeal of the revenue. Here our focus will be on technicalities of the case and consequent facts applicable.